Posts Tagged ‘Graphs and Laughs’
Darn Deflation
Deflation is bad for three reasons. First, by reducing GDP it raises debt to GDP ratios making it harder to service existing debt. Second, once consumers and businesses expect prices to be cheaper in the future, delaying purchases makes sense. Third, it reduces the tools available to central banks to fight recessions, the most powerful…
Read MoreArbitrage
One reason the stock market is doing so well is due to stock buybacks. Despite high share prices, for dividend-paying firms with top-notch credit ratings, interest rates have never been lower. These firms are borrowing long-term at 2% to buy back stock with, perhaps, a 4% dividend. And since interest is tax deductible, the borrowing…
Read MoreBuilding on Housing
As if more proof were needed that home building is rapidly improving, and that production builders are the biggest winners, Taylor Morrison plans an IPO to take advantage of the run-up in home builder stock prices. The planned IPO will value the firm at $2.6 billion. Not bad given that it was purchased in 2011…
Read MoreCash Crunch
The Cyprus fiasco shows us two things. First, countries that don’t issue their own currency simply cannot guarantee bank deposits as they have no control over their monetary policy. It also shows that monetary unions cannot survive bank runs. The upshot, there will now be a calls for a euro-wide bank regulator (like the FDIC)…
Read MoreBad Green Vegetables
The Friday File: 2.2 million Americans get sick annually from contaminated leafy vegetables. That represents 23% of all food-borne illness. Fruits, vegetables and nuts sicken 4.4 million persons, beef, pork and poultry cause 2.1 million illnesses and dairy products, another 1.3 million. As for deaths, the pathogens on poultry are particularly deadly, accounting for 19%…
Read MoreSequester Certainty
Given Republican unwillingness to raise taxes and Democratic insistence on it, the delayed automatic $110 billion sequester will kick-in on March 1st. This will reduce GDP growth by 0.75% and guarantees a weak first half of ’13 as the economy is already painfully digesting the two percentage-point Social Security tax hike that began 1/1/13. The…
Read MoreGovernment Goes On!
If a continuing resolution is not passed by the Congress by 3/27/13, the Obama administration will be forced to shut down activities funded by appropriations and all non-essential government operations. But this isn’t that ominous. Only 40% of federal spending relies on appropriations and two-thirds of that is considered “essential” and thus will continue even…
Read MoreMonetary Slow Down
While the Fed has increased the money supply by $2 trillion and will increase it by another $1 trillion by 1/1/14, inflation is MIA. This is because the velocity of money, or the number of times a dollar changes hands before it is saved, has collapsed. Before the Great Recession, M1 (cash) velocity was 10.5,…
Read MoreHouses for Nothing
According to CoreLogic, house prices rose 7.4% for the 12 months ending 11/12 (6.7% excluding short sales), the best numbers since 5/06! With 30-year mortgage rates at 3.4%, this means that the real cost of financing a home is NEGATIVE 4%! That’s like getting paid 4%/year to buy a house. As a result, it’s not…
Read MoreBaby Me!
The Friday File: To see if having children shortens your life, childless couples who sought in vitro fertilization (IVR) and were successful were compared to those who tried and were unsuccessful. Turns out women who ended up childless had a death rate four times greater than those who gave birth. For childless men, the death…
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